Local concerns match statewide trends on tax plan

Published: Saturday, March 30, 2013 at 8:07 p.m.

Last Modified: Saturday, March 30, 2013 at 8:07 p.m.

BATON ROUGE — With roughly a week to go until the regular session convenes, unilateral support from the Terrebonne-Lafourche delegation appears unlikely for Gov. Bobby Jindal’s tax swap plan.

Under fire for weeks for its effects on low-income families and small businesses, and at times for its math, the administration’s plan would eliminate $3.6 billion in personal and corporate income taxes to make way for a new 6.25 percent state sales tax, among other changes.

It promises to be the focal point of the session that begins April 8 and adjourns June 6.

Siding with members of the conservative Budget Reform Coalition, Rep. Dee Richard of Thibodaux has complained that too few details were made available about the administration’s plan in recent weeks and most information was unreliable.

Jindal originally told lawmakers the 4 percent state sales tax would only jump to 5.88 percent under his plan, but the figure was hiked Thursday as the various pieces of the governor’s legislative package were being introduced.

The decision to increase the state sales tax a second time came on the heels of a report from the Public Affairs Research Council, a Baton Rouge-based nonprofit policy watchdog, that found the tax plan, with a 5.88 percent sales tax, would result in a $500 million to $650 million shortfall.

Richard, who has no party affiliation, said he plans to file a bill for the session that would repeal all tax exemptions that are not protected in the state constitution, increasing state tax revenues by $4 billion to $5 billion annually.

While the bill is still being drafted, Richard said it would be an avenue to effectively decrease income taxes.

“I know it’s a long shot and it will step on a lot of toes, but we need an alternative plan on the table,” he said. “We should at least look at that before altering sales taxes.”

If he is unsuccessful, Richard said he would consider introducing the same language in the form of a constitutional amendment during the 2014 regular session.

“That would allow the people to vote on it,” he added.

ANOTHER ALTERNATIVE PLAN

Jindal has said all along that he wants his plan to be revenue neutral, meaning the state would not experience a drop or rise in tax revenues when the changes take effect Jan. 1, 2014.

In addition to trading income taxes for more sales taxes, other parts of Jindal’s plan would increase taxes on cigarettes, scale back existing exemptions and offer tax rebates to the poor and retired, both of which would be vulnerable for greater tax liability under the proposed swap.

Another alternative can be found with the Legislative Black Caucus, which wants to reduce income taxes, repeal corporate franchise taxes and increase taxes on tobacco products, among other mechanisms introduced by the caucus chairwoman, Rep. Katrina Jackson, D-Monroe.

Sen. Troy Brown, D-Napoleonville, another member of the caucus who represents portions of northern Lafourche Parish, said he has largely been influenced by public opinion, especially in his Senate district.

“As of now, based on the public’s discomfort on what they’re hearing, I don’t see myself being anywhere near being able to support the governor’s plan,” Brown said.

Revenues from the current income tax structure may be too important to give up, he said.

“To do away with such a stable revenue stream in such a dramatic way, it’s just improbable. We’re going to end up with more problems than we have now,” he said.

The state budget Jindal has proposed for the next fiscal year predicts a revenue shortfall of $1.3 billion, which may be an indication that an aggressive tax swap at this juncture is ill timed, Brown said.

WORDS OF SUPPORT, UNCERTAINTY

While there may be some dissent among the Legislature’s leadership — Brown is vice chair of the Senate Environmental Quality Committee — many are expected to stand by Jindal, as they have on major issues in previous sessions.

“I like the concept. I really do,” said Dove of Jindal’s tax swap package. “It could probably attract more business to Louisiana. But right now I’m trying to find out more about how the changes would affect low-income families and the middle class.”

The administration favored an example of a teacher making $45,000 who would have a tax benefit of $680 under the plan, although Democrats have argued the same teacher would lose some of the benefits by paying for increased sales taxes for services targeted under the Jindal plan.

Rep. Truck Giscalir, D-Larose, said he is still trying to go through all of the legislation introduced by the administration.

“I’ve heard a lot of input from both blue collar folks who both like the plan and don’t like the plan,” he said. “I look forward to reviewing all of the legislation.”

Other examples of income ranges and tax benefits offered up by Jindal include the following:

-- An employee at a landscaping company and a stay-at-home mom making about $35,000 per year would see their annual state tax burden reduced by about $130.

-- A plant worker making $60,000 per year, around $950.

-- A couple who owns a small business making about $90,000 per year, about $1,450.

MOUNTING CRITICISM

Rep. John Bel Edwards, D-Amite, chairman of the House Democratic Caucus, held a news conference this past week to offer a wide-ranging critique of Jindal’s plan.

He argued it would benefit Louisiana’s wealthy but will cost the state’s businesses, local governments, retirees and senior citizens, the middle class and poor, and the state’s tourism industry.

Moreover, Edwards said “it creates the highest sales tax in the nation.”

The influential Louisiana Association of Business and Industry, which backed Jindal’s education and pension reforms last year, is concerned the plan would shift too much tax liability to business.

It has promised to oppose Jindal’s plan if it remains in its current form.

Although financial services are supposed to be exempt from the plan, officials with the Louisiana Bankers Association said they are worried because banks rely on other business services that would be taxed.

The Louisiana Municipal Association, which represents city governments, has “no position” on the plan, but its executive board “still has major concerns regarding the sweeping reform,” according to a prepared statement.

How the plan will affect the ability of municipalities to maintain or increase local sales taxes is chief among them.

FIGHTING IN FAVOR

On the other side of the debate, the Beacon Hill Institute, the economic research arm of Suffolk University in Boston that is supported chiefly by conservative money, released a study this past week calling the plan a “powerful incentive for Louisiana’s households and businesses to save and invest, spurring increases in employment and incomes.”

It was released in partnership with the New Orleans-based Pelican Institute for Public Policy.

In a speech Friday at the West Bank Luncheon in New Orleans, Jindal made his case to eliminate income taxes, abolish more than 200 “special interest tax loopholes” and make Louisiana’s tax code “simpler and fairer for Louisiana families and businesses.”

While Louisiana’s economy is outperforming the southern and national economies, he said, there are too many Louisianans who are unemployed, underemployed or who have left the state to find work.

“Our tax code is complex, unstable and unfair,” Jindal said. “If you have a lobbyist and a lawyer, you can find a loophole in the tax code. Families don’t have lobbyists in Baton Rouge, and they aren’t getting a fair shake in the current system. We need a system where special interest groups are no longer able to rig the system.”

To the argument that his plan would negatively affect low-income families, he countered that eliminating income taxes and closing loopholes would reduce the tax burden for individuals and families across every income level.

“The bottom line is that eliminating income taxes will put your money back into your hands, so you can spend it how you want,” Jindal said.

While local and state sales taxes combined would be the among the highest in the nation, Jindal argued the state sales tax rate alone would actually be one of the lowest in the region.

Texas has a 6.25 percent state sales tax, Mississippi has a 7 percent state sales tax and Arkansas has a 6 percent state sales tax.

“Under the new system, Louisiana’s state sales tax rate would be 24th lowest in the nation,” according to information released by Jindal’s office.

The governor said the tax code in Louisiana is playing a role in outmigration, the pattern of people leaving the state, which is why it is his top priority for 2013.

“People are mobile, and they can move, and they will move to find new jobs and opportunities for their families,” Jindal said. “This is exactly why states with no income taxes are outperforming other states in terms of economic growth and population growth.”

Capitol Correspondent Jeremy Alford can be reached at jeremy@jeremyalford.com.

<p>BATON ROUGE — With roughly a week to go until the regular session convenes, unilateral support from the Terrebonne-Lafourche delegation appears unlikely for Gov. Bobby Jindal's tax swap plan.</p><p>Under fire for weeks for its effects on low-income families and small businesses, and at times for its math, the administration's plan would eliminate $3.6 billion in personal and corporate income taxes to make way for a new 6.25 percent state sales tax, among other changes.</p><p>It promises to be the focal point of the session that begins April 8 and adjourns June 6. </p><p>Siding with members of the conservative Budget Reform Coalition, Rep. Dee Richard of Thibodaux has complained that too few details were made available about the administration's plan in recent weeks and most information was unreliable. </p><p>Jindal originally told lawmakers the 4 percent state sales tax would only jump to 5.88 percent under his plan, but the figure was hiked Thursday as the various pieces of the governor's legislative package were being introduced.</p><p>The decision to increase the state sales tax a second time came on the heels of a report from the Public Affairs Research Council, a Baton Rouge-based nonprofit policy watchdog, that found the tax plan, with a 5.88 percent sales tax, would result in a $500 million to $650 million shortfall.</p><p>Richard, who has no party affiliation, said he plans to file a bill for the session that would repeal all tax exemptions that are not protected in the state constitution, increasing state tax revenues by $4 billion to $5 billion annually. </p><p>While the bill is still being drafted, Richard said it would be an avenue to effectively decrease income taxes. </p><p>“I know it's a long shot and it will step on a lot of toes, but we need an alternative plan on the table,” he said. “We should at least look at that before altering sales taxes.”</p><p>If he is unsuccessful, Richard said he would consider introducing the same language in the form of a constitutional amendment during the 2014 regular session. </p><p>“That would allow the people to vote on it,” he added.</p><h3>ANOTHER ALTERNATIVE PLAN</h3>
<p>Jindal has said all along that he wants his plan to be revenue neutral, meaning the state would not experience a drop or rise in tax revenues when the changes take effect Jan. 1, 2014. </p><p>In addition to trading income taxes for more sales taxes, other parts of Jindal's plan would increase taxes on cigarettes, scale back existing exemptions and offer tax rebates to the poor and retired, both of which would be vulnerable for greater tax liability under the proposed swap. </p><p>Another alternative can be found with the Legislative Black Caucus, which wants to reduce income taxes, repeal corporate franchise taxes and increase taxes on tobacco products, among other mechanisms introduced by the caucus chairwoman, Rep. Katrina Jackson, D-Monroe.</p><p>Sen. Troy Brown, D-Napoleonville, another member of the caucus who represents portions of northern Lafourche Parish, said he has largely been influenced by public opinion, especially in his Senate district. </p><p>“As of now, based on the public's discomfort on what they're hearing, I don't see myself being anywhere near being able to support the governor's plan,” Brown said.</p><p>Revenues from the current income tax structure may be too important to give up, he said.</p><p>“To do away with such a stable revenue stream in such a dramatic way, it's just improbable. We're going to end up with more problems than we have now,” he said.</p><p>The state budget Jindal has proposed for the next fiscal year predicts a revenue shortfall of $1.3 billion, which may be an indication that an aggressive tax swap at this juncture is ill timed, Brown said.</p><h3>WORDS OF SUPPORT, UNCERTAINTY</h3>
<p>While there may be some dissent among the Legislature's leadership — Brown is vice chair of the Senate Environmental Quality Committee — many are expected to stand by Jindal, as they have on major issues in previous sessions. </p><p>House Natural Resources Chairman Gordon Dove, R-Houma, has offered encouraging words so far.</p><p>“I like the concept. I really do,” said Dove of Jindal's tax swap package. “It could probably attract more business to Louisiana. But right now I'm trying to find out more about how the changes would affect low-income families and the middle class.” </p><p>The administration favored an example of a teacher making $45,000 who would have a tax benefit of $680 under the plan, although Democrats have argued the same teacher would lose some of the benefits by paying for increased sales taxes for services targeted under the Jindal plan. </p><p>Rep. Truck Giscalir, D-Larose, said he is still trying to go through all of the legislation introduced by the administration.</p><p>“I've heard a lot of input from both blue collar folks who both like the plan and don't like the plan,” he said. “I look forward to reviewing all of the legislation.” </p><p>Other examples of income ranges and tax benefits offered up by Jindal include the following:</p><p>-- An employee at a landscaping company and a stay-at-home mom making about $35,000 per year would see their annual state tax burden reduced by about $130.</p><p>-- A plant worker making $60,000 per year, around $950.</p><p>-- A couple who owns a small business making about $90,000 per year, about $1,450.</p><h3>MOUNTING CRITICISM</h3>
<p>Rep. John Bel Edwards, D-Amite, chairman of the House Democratic Caucus, held a news conference this past week to offer a wide-ranging critique of Jindal's plan.</p><p>He argued it would benefit Louisiana's wealthy but will cost the state's businesses, local governments, retirees and senior citizens, the middle class and poor, and the state's tourism industry.</p><p>Moreover, Edwards said “it creates the highest sales tax in the nation.”</p><p>The influential Louisiana Association of Business and Industry, which backed Jindal's education and pension reforms last year, is concerned the plan would shift too much tax liability to business. </p><p>It has promised to oppose Jindal's plan if it remains in its current form. </p><p>Although financial services are supposed to be exempt from the plan, officials with the Louisiana Bankers Association said they are worried because banks rely on other business services that would be taxed.</p><p>The Louisiana Municipal Association, which represents city governments, has “no position” on the plan, but its executive board “still has major concerns regarding the sweeping reform,” according to a prepared statement. </p><p>How the plan will affect the ability of municipalities to maintain or increase local sales taxes is chief among them.</p><h3>FIGHTING IN FAVOR</h3>
<p>On the other side of the debate, the Beacon Hill Institute, the economic research arm of Suffolk University in Boston that is supported chiefly by conservative money, released a study this past week calling the plan a “powerful incentive for Louisiana's households and businesses to save and invest, spurring increases in employment and incomes.” </p><p>It was released in partnership with the New Orleans-based Pelican Institute for Public Policy. </p><p>Grover Norquist of Americans for Tax Reform also supports Jindal's plan.</p><p>In a speech Friday at the West Bank Luncheon in New Orleans, Jindal made his case to eliminate income taxes, abolish more than 200 “special interest tax loopholes” and make Louisiana's tax code “simpler and fairer for Louisiana families and businesses.”</p><p>While Louisiana's economy is outperforming the southern and national economies, he said, there are too many Louisianans who are unemployed, underemployed or who have left the state to find work.</p><p>“Our tax code is complex, unstable and unfair,” Jindal said. “If you have a lobbyist and a lawyer, you can find a loophole in the tax code. Families don't have lobbyists in Baton Rouge, and they aren't getting a fair shake in the current system. We need a system where special interest groups are no longer able to rig the system.”</p><p>To the argument that his plan would negatively affect low-income families, he countered that eliminating income taxes and closing loopholes would reduce the tax burden for individuals and families across every income level.</p><p>“The bottom line is that eliminating income taxes will put your money back into your hands, so you can spend it how you want,” Jindal said.</p><p>While local and state sales taxes combined would be the among the highest in the nation, Jindal argued the state sales tax rate alone would actually be one of the lowest in the region. </p><p>Texas has a 6.25 percent state sales tax, Mississippi has a 7 percent state sales tax and Arkansas has a 6 percent state sales tax.</p><p>“Under the new system, Louisiana's state sales tax rate would be 24th lowest in the nation,” according to information released by Jindal's office.</p><p>The governor said the tax code in Louisiana is playing a role in outmigration, the pattern of people leaving the state, which is why it is his top priority for 2013.</p><p>“People are mobile, and they can move, and they will move to find new jobs and opportunities for their families,” Jindal said. “This is exactly why states with no income taxes are outperforming other states in terms of economic growth and population growth.”</p><p>Capitol Correspondent Jeremy Alford can be reached at jeremy@jeremyalford.com.</p>